Employers Say
Jobs Plan Won’t Lead to Hiring Spur
Published: September 9, 2011 - New York Times
The dismal state of the economy is the main reason many companies are
reluctant to hire workers, and few executives are saying that President
Obama’s jobs plan — while welcome — will change their minds any time soon.
That sentiment was echoed across numerous industries by executives in
companies big and small on Friday, underscoring the challenge for the Obama
administration as it tries to encourage hiring and perk up the moribund economy.
The plan failed to generate any optimism on Wall Street as the Standard &
Poor’s 500-stock index and the Dow Jones industrial average each fell about 2.7
percent.
As President Obama faced an uphill battle in Congress to win support even for
portions of the plan, many employers dismissed the notion that any particular
tax break or incentive would be persuasive. Instead, they said they tended to
hire more workers or expand when the economy improved.
Companies are focused on jittery consumer confidence, an unstable stock
market, perceived obstacles to business expansion like government regulation
and, above all, swings in demand for their products.
“You still need to have the business need to hire,” said Jeffery Braverman,
owner of Nutsonline, an e-commerce company in Cranford, N.J., that sells nuts
and dried fruit. While a $4,000 credit could offset the cost of the company’s
lowest-cost health insurance plan, he said, it would not spur him to hire
someone. “Business demand is what drives hiring,” he said.
Indeed, the industries that are hiring workers now — like technology and
energy — are those where business is strong, in contrast to the overall economy.
Administration officials and some economists, of course, say they believe the
president’s plan, if adopted, could help increase demand more broadly. The
proposed payroll tax cuts for individuals should spur consumer spending and in
turn, prompt companies to hire more people.
But the plan also includes incentives for companies to hire more workers,
including a payroll tax cut for businesses and a $4,000 tax credit for those
employers that hire people who have been out of work for six months or more.
To the extent these measures could be used, many employers said they would
most likely support people whom companies were planning to hire anyway.
Chesapeake Energy, one of the biggest explorers of oil and gas in shale
fields across the country, for example, said it had 800 positions open, and had
already received tax credits for hiring the long-term unemployed.
But Michael Kehs, vice president for strategic affairs and public relations,
said in an e-mail that the credit “does not drive our hiring.”
For others, the math just does not add up. Roger Tung, the chief executive of
Concert Pharmaceuticals, said the company, a privately held biotechnology firm
with 45 employees, would save $150,000 a year from the proposed corporate
payroll tax deductions.
But that is still not enough to cover the cost of hiring even one additional
employee at the Lexington, Mass., company, Mr. Tung said, once benefits and
other expenses besides salary are included. He can hire, he said, only when
investors become confident again and the company can raise more money.
Economists estimated that President Obama’s plan, costing an estimated $447
billion if it were ever fully adopted, could create anywhere from 500,000 to
nearly two million jobs next year.
Most of those jobs would be added, economists say, as workers spend the
additional take-home pay that would result from a proposed payroll tax cut for
employees. As consumers increase spending, that can prompt more hiring by
retailers, washing machine makers, restaurants and more.
Some of the new jobs would also probably come from measures like the proposed
$35 billion to retain or hire teachers, police and firefighters, as well as $30
billion to refurbish school buildings and $50 billion to build or repair
highways, railroads, transit systems and waterways.
Construction workers in particular are in dire need of work, as they were
among the hardest hit by the collapse of the housing market. More than a million
construction workers are still looking for employment.
“There are so many trades people sitting at home waiting for jobs, and we
have to turn them down because we don’t have work, ” said Syed Habib, secretary
of Falak Construction, a contractor in North Brunswick, N.J., that works on
public projects and is hoping that the school modernization measure passes.
Some analysts said the president’s proposal to cut payroll taxes for the
first $5 million of a business’s payroll taxes could give some companies a
reason to hire, though mostly at the margins.
In the pharmaceutical industry, for example, where tens of thousands of
employees have lost jobs in the last few years, a lowered payroll tax could
significantly affect labor costs, said Richard M. Gordon, a pharmaceutical
industry analyst at the University of Michigan’s Ross School of Business.
“So it’s a little less likely that people will be fired, and a little more
likely that people will be hired in pharmaceutical companies that are doing
well,” Mr. Gordon said.
President Obama’s jobs plan would actually have a detrimental effect on other
parts of the health care industry, some officials said. Hospitals warned that
the proposals could end up crimping their hiring if the president’s programs
were paid for with sharp reductions in the federal Medicare
program.
Lloyd H. Dean, the chief executive of Catholic Healthcare West, a large
health system that employs some 55,000 people in California, Arizona and Nevada,
praised Mr. Obama’s efforts to promote job growth. But, he said in a statement,
“Approximately 65 percent of the people we care for are insured through Medicare
or Medicaid,
and any further cuts in reimbursements from those programs will severely impact
our ability to hire and retain workers.”
Even some company officials among the president’s invited guests at the joint
address expressed concerns about how the government could pay for such a large
package.
David Catalano, who helped found Modea, a digital advertising company in
Blacksburg, Va., said that he was wary of the president’s pledge to ask the
“wealthiest Americans and biggest corporations to pay their fair share.”
His company was organized as an S Corporation, in which profits are passed
through to shareholders, so it would face higher taxes under the president’s
proposal, he said.
He added: “My partner and I have reinvested 100 percent of the profits that
our agency has made over the last five years back into the company. If the
government takes a bigger share of that from me, it directly impedes my ability
to grow the agency.”
Perhaps the most intractable problem facing the economy right now is the
plight of the long-term unemployed. More than six million people have been
searching for jobs for six months or longer. But with the growing stigma that
employees attach to this group of people, the president’s proposal to give
employers $4,000 tax credits for hiring the long-term unemployed is likely to be
a hard sell among companies.
Jen-Hsun Huang, the chief executive of the chip maker Nvidia, a Santa Clara,
Calif., designer of chips for smartphones and tablets, said that because of
growth in those markets, the company, which currently employs about 5,000 of its
7,000 global workers in the United States, expects to add about 20 percent more
people within the next year.
But he said the incentives would not influence the company’s hiring
decisions. “The people we hire tend not to be out of work for six months,” said
Mr. Huang. Instead, he said, the company recruits recent graduates from the
country’s top engineering schools. “The guys we hire are like sports
stars,” he said.
Lucious Plant, work force development administrator in Montgomery County,
Ohio, where Dayton is the county seat, said companies were shortsighted for
viewing people who had been out of work for several months as somehow inferior.
Given today’s economy, he said, it was common for those who lost their jobs to
stay unemployed for six months or more, and that many of those workers were
highly skilled.
“I think it would be very easy to have six months of unemployment and still
be a top candidate,” Mr. Plant said.
But more people needing work than the current business climate warrants.
“If I get a $4,000 benefit for hiring you and I pay you $80,000 and you’re
going to sit at your desk and do nothing because there’s nothing to do,” said
Marty Regalia, chief economist of the United States Chamber of Commerce, “then
the businesses aren’t going to hire you.”
Reporting was contributed by Steve Lohr, Duff Wilson, Damon Darlin, Reed
Abelson and Robb Mandelbaum in New York, Clifford Krauss in Houston and Andrew
Pollack in Los Angeles.